Every time Netflix increases its prices, millions of binge-watching users balk at the prospect of paying a couple of dollars more. But after you consider what Netflix is offering, and where it could be headed, you should quit complaining. Why, because Netflix is an absolute steal.

“In May 2014, Netflix announced it was raising its prices from $7.99-per-month to $8.99-per-month. In October 2015, Netflix raised prices once again, from $8.99-per-month to $9.99-per month.”

Each of these price hikes saw users up in arms, accusing Netflix of hypocrisy, penny-pinching, and taking advantage of their nigh-monopolistic position. The audacity of asking users for the cost of just half a Starbucks latte left millions reeling. In return for what?, they cried. Unlimited streaming of some of the greatest classic and original content ever produced, that’s what.

The tightfisted attitude of users left my jaw agape. The average U.S. household spends $2,500 per year on entertainment, $1,700 on clothing, and $580 on personal care. When the cost of movie tickets or moisturizer crawls up another dollar or so, barely an eyelid is batted. But when Netflix wants an extra $12 – $24 per year (that’s $0.03 – $0.06 per day!) for their ever-improving nightly entertainment, customers recoil in disgust. Let me explain why that’s crazy.

1. It’s Still a Bargain

Netflix’ customers demand an ever-expanding library. As that library continues to increase in size, the cost to maintain and add to it understandably increases too. That cash has to come from somewhere.

As we’ll see later though, there are other reasons for not abandoning Netflix in favor of Amazon over a trifling few dollars. In any case, if Amazon upped its prices slightly too, I would personally still argue the case that it’s still worth keeping your subscription to both.

That being said, Netflix is (at the time of writing) still cheaper than the $12 Hulu charges for its much smaller, commercial-free library. If you want to stream the limited (but impressive) titles of HBO — Game of Thrones, The Sopranos, The Wire, etc.— it’ll cost you $15 per month.

Meanwhile, the pay-by-the-title offerings from iTunes and Google Play would, show-for-show, cost you a small fortune.

2. No, It Really Is a Bargain

In Netflix’ quarterly letter to shareholders, released in January 2016, the company claimed that its members streamed 42.5 billion hours of programming in 2015. In 2014 that figure was 29 billion hours. This means the average user watched 93 minutes of content per day on Netflix in 2015.

At $8 per month, that’s $0.17 per hour

At $10 per month, that’s $0.21 per hour

At $12 per month, that’s $0.25 per hour

At $14 per month, that’s $0.29 per hour

Over time, average consumption on Netflix is increasing. This means the cost-per-hour of consumption is going down. In other words, the more time you’ve been spending on Netflix, the less you’ve been paying per-hour.

3. Quality Content Comes at a Price

Aside from its extremely affordable price, Netflix has mastered the recipe for creating must-watch television series. These TV series are not only incredibly high quality (receiving 34 Emmy nominations in 2015), but you can watch an entire series in one sitting, the day it’s released, on virtually any device.

“The truth is, it’s wonderful, because there’s only one thing we’re doing. We’re not pandering to advertisers: we’re not pandering to a network. All we’re doing is making the show we want and that we believe in.”

When Amazon attempted to follow suit by releasing The Man in The High Castle, the results were very good, but not on the same level that Netflix has achieved. If you’re going to pay a subscription to just one streaming service, at least choose the service with the best reputation for producing stunning show after stunning show.

4. This Is a New Era of Creative Freedom

By far the most exciting prospect of Netflix having more cash in its back pocket is the potential for a new era of TV.

Each segment of Netflix’ millions of viewers enjoys different content. Until recently, most of these niches have been ignored on almost all networks. The viewer numbers just aren’t high enough to justify production costs.

However, Netflix has the resources, algorithms, and know-how required to create very creative forms of television that no one else has the courage to fund. In backing Making a Murderer, Netflix dipped its toe into these experimental waters. The results have been extraordinary, with some saying that this one series may have created an entire new genre of film.

With its enviable track record, if we had to entrust one streaming service to undertake the task of reinvigorating creativity and experimentation in the TV industry, there would be no surer bet than Netflix.

With even more cash available the doors could be opened to more creative and technical freedom. In Hollywood, producers, actors, and directors will likely soon use Netflix as their distribution platform of choice. After all, it may be the only platform that can both fund and distribute their programs to the right audiences.

If, for an extra $2 per month, we can contribute to this new age of experimental TV, I for one am all for it.

So, Are You Happy to Pay?

By comparing the price of Netflix to its competitors, the quality of its productions, its ability to produce ever-more creative shows, and the cost-per-hour of streaming, we have surely demonstrated that a few extra dollars don’t really matter.

Your email address will not be published. Required fields are marked *

Comment

Name *

Email *

Anonymous

April 26, 2016 at 7:49 pm

I do agree that Netflix is indeed a bargin for what they offer, i ant help but wonder if it had more competition, would they still be raising the prices, or would they have better films?

Monopoly from a company has NEVER turned out well for the consumer (even Steam got a bit nasty with their refund and customer service). More competition is always good, but i think Netflix has the right pricing.

and when it comes to the BBC and their Tv license...they can kiss my rumpus.

I agree that Netflix needs competition. It seems that Amazon's offering is catching up, and plenty of other huge companies are set to take a chunk of the pir (HBO, YouTube etc), so I don't believe Netflix will ever become a monopoly... at least, I hope not!

No it didn't, but it is frequent in articles like these to imply if not propose that the state dictate prices in these situations to insure "fairness".

Neil

April 12, 2016 at 11:29 pm

The snarkiness was not necessary, but thank you for the explanation. Personally, I think you are absolutely wrong, but you are free to believe what you like.

Anonymous

April 13, 2016 at 9:20 am

The belief in state-mandated associations is the basis of fascism whether those associations are personal OR economic.

The other choice is freedom of association which I prefer.

Sorry to hear you prefer the former

Rob Nightingale

May 18, 2016 at 10:43 am

The state hasn't mandated any of these prices. It's simply a matter of price elasticity.

Anonymous

May 18, 2016 at 12:31 pm

Not yet, for Netflix. But we already have state-mandated wages in the form a minimum wage. And calls for continued state-control like Net Neutrality over the internet and other industries do not put that out of reach with some saying Net Neutrality II is coming.

Ray Byars

February 9, 2016 at 5:02 pm

I, like a few others have been with Netflix since both streaming and DVD's at home were together less than $10. I was singing their praises back then. When they decided to up their prices, it "doubled", no kidding. Now it was one price for streaming and one for DVD. I almost blew my top. But, like you, I realized that it was still a super deal. The streaming is much better now and just about all HD not to mention the "original" series'. Now my frustration is with the DVD in the mail. I used to receive 2 within a week and now I'm lucky to receive 1 a week. To me that's like another rate hike and I finally called them. Even though the rep was nice about it and I threatened leaving, I doubt I will. Yes, it's still the best value around but that doesn't mean I can't express my frustration. Believe me, if it wasn't for my wife, cable TV would be a thing of the past in our household, not Netflix. That's the big ripoff!!!!

Guess Netflix is a a good bargain for US ppl. Outside the content is so thinned out there's no reason to not look for other channels. Like the movies when I was a child. Nice movie, will be exciting to see it in a year.

24 Hours in a day. 8 hours to sleep, wash. 2 hours to eat, clean. 8 hours to work. 1 hour to commute/break. 1/2-1 hour to exercise/take care of yourself. 1+ hour to communicate/relate to friends/family. 1 hour (or many more) on PC/social network/smartphone. 1/2 hour miscellaneous.
So... about 22 hours so far. Hopefully you get 2 days of freedom/week, many don't.
Bottom line... How does anyone find the time to invest in Netflix or any premium entertainment and really get their money's worth?

A price hike is always going to be hard to argue for, but you've done so admirably. Especially that Netflix is producing so much new content themselves - Marvel stuff, for instance, for many is worth the price of admission alone.

The problem, I think, is that people undervalue entertainment - TV especially. It brings to mind all the BBC-bashing, largely by media outlets that support the Tories here in the UK. People claim, "oh, I only watch an hour a week" or something ridiculous; "there';s never anything good on." But that's nonsense. The prices we pay for both the BBC and Netflix are more than reasonable. Your cost-per-hour analysis proves this for the average viewer. Sadly, there will always be vast swathes of folk who say they watch significantly less than that.

Completely agree, Philip. But with the BBC, I have to differ, as I extremely rarely watch anything on the BBC (maybe an hour or so every couple of months), that would make the cost-per-hour pretty damn high compared to other forms of entertainment, so financially, it doesn't make much sense for me. I'd rather subscribe to Amazon Instant Video, or HBO, as they have more shows (which I can access for more than just 30 days) for less than a TV license.

That being said, if the BBC asked me for $10 per month to access their entire back-catalogue of shows, I'd probably be happy to pay...

Nope, we didn't get paid for this. When we do write about a company in return for money it's clearly labeled as such. This is just an opinion piece, and opinion pieces tend to be, well, opinionated. You are, of course, free to disagree and argue counterpoints.

Well, thank you very much. I do have a pretty high opinion of Netflix, but am critical of other services. Netflix is by no means perfect. They are losing a lot of good movies, but that's causing them to plough more funding into their own shows. Overall, I think it's having a positive impact on their library.

If they continue upping their price past, say, $17 per month without huge amounts of incredible shows being released though, I'd probably reverse my viewpoint.

Brian

February 8, 2016 at 8:58 pm

I agree with this article. I've had Netflix since before people even knew what it was, before they did online streaming, when it was DVD only. For a long time I was grandfathered into old prices but eventually they did away with the old rates. I was upset for a minute that my bill was going up, but then I thought objectively about the value I'm getting from Netflix and I quickly realized that I get so much from Netflix for such a small amount of money that I'm happy to pay more as long as they continue to improve and offer more for the money.
Netflix is the future of what I want from the old school TV industry at the right price! Contrast that to a $100+/month cable or dish bill and the value is enormous in comparison.

Driving all their competition out of business, however, then hiking their prices as they continually expand their customer base internationally is monopolistic gouging of customers.

As the user base increases, the price of content per user goes down - not up. Netflix could pay for their original content with this exponential customer base increase. If they want to lower their prices and then pass on their download costs to the users, okay.

Instead they have opted to drive their competition out of business, get a dominant position in the market and then price hike customers. Due to their current size and position they know they can take advantage of their customers.

Netflix may be taking market share from cable companies, but it's nowhere near a monopoly, and I doubt it ever will be.

It's true that as the user base increase the price of content per user goes down, but on a user for user basis, and for cost-per-hour viewing, it still increases.

But yes Netflix does have a dominant position, but to keep that position in needs to invest huge amounts of cash WHILE delivering exceptional value. It's a balancing act that so far, they seem to be doing right.

I don't think any of us knows what you're going on about at this point, Howard. There is literally nothing in this article about the state mandating a Netflix price rise.

Anonymous

February 9, 2016 at 1:23 pm

That's fine , Dave, I don't expect you to grasp the concept of freedom of association since you so often prefer state-mandated ones.

Rob Nightingale

February 9, 2016 at 5:32 pm

There is complete freedom of association when it comes to streaming TV. As you can see from this article, Netflix has competitors, and you are free to choose between them.

And even if, unlikely as it is, Netflix become a monopoly, the chances of the state mandating anything like what you are proposing, isn't conceivable in any way.

Anonymous

February 9, 2016 at 6:51 pm

Is it conceivable it be mandated to NOT be a monopoly after chosen by consumers on the market ?

Rob Nightingale

February 9, 2016 at 7:08 pm

I'm not entirely sure on the legality of monopolies in the US. In the UK we have quite strict laws on monopolistic activities, especially if they are achieved by way of corporate acquisitions. The likelihood of that happening with Netflix is almost 0, though. If none of the cable companies managed to achieve a monopoly in so many years, what's to even hit that Netflix might? And with huge companies like Amazon throwing their weight behind online streaming, Netflix will very much struggle to keep its market share.

Anonymous

February 9, 2016 at 7:55 pm

So the state already mandates associations to the extent it tells companies how or what they may buy or obtain through free assoications (that would otherwise be legal to do) ?

Rob Nightingale

February 9, 2016 at 8:38 pm

I'm not entirely fluent in it all, but in the UK, the government CAN intervene if it looks like a corporate acquisition will lead to a monopolistic position in a certain industry that could cause negative consequences for the end consumer. This is usually enforced when supermarket chains try to buy each other out, to ensure a single company cannot solely control the price of foodstuffs.

So no, the government cannot say how or what a company may buy, but it can prevent an acquisition if it leads to them controlling too much of an important market.

Anonymous

February 9, 2016 at 8:58 pm

So you are admitting the state can mandate associations in contrast to allowing freedom of association if it thinks the association is bad ?

Can it do the same there with speech and press ?

Rob Nightingale

February 9, 2016 at 9:09 pm

I'm not entirely sure what you're asking here. If a corporation decides to aggressively grow due to huge funding allocations, thereby driving out all competition, we have privately mandated associations, which the end user has no say over.

If an organization (say, the government) notices this happening, and thereby steps in to prevent privately mandated associations (because the market isn't always right), the necessity of state mandated association does not logically follow.

In this case the state is maintaining choice, not prohibiting it

What does this have to do with Netflix?

Anonymous

February 9, 2016 at 9:37 pm

I'm asking if the state allows freedom of association or calls for state mandated ones by state-mandated rules when it thinks the association is bad

I'm not concerned with what BAD is as long as it doesn't involve murder or theft etc.

Your opinion of what is good for the economy is not sufficient to violate freedom of association or any other civil right.

And I have a hard time seeing that you don't know exactly what I mean :D

Rob Nightingale

February 9, 2016 at 9:46 pm

What does this have to do with Netflix?

Rob Nightingale

February 9, 2016 at 9:48 pm

Also, the interference of the UK government in these matters is not based on what is "good for the economy". It's based on what is good for the population as a whole (in theory). Those are two very, very different things.

Anonymous

February 9, 2016 at 10:08 pm

Well let me add those is or just go to what "your personal opinion is".

We don't allow the state to censor press or speech here because of what they think of the topics or for whom the censorship is supposedly good for.

Like I said before, the support of state-mandated association over freedom of association is fascism.

Rob Nightingale

February 9, 2016 at 10:12 pm

And the relevance to Netflix is...?

Anonymous

February 9, 2016 at 10:16 pm

I already said in my initial statement....... it was in case MAKEUSOF support state-mandated association as a way to address prices/wage/etc/ what is wrong with the economy/Netflix.

Rob Nightingale has a degree in Philosophy from the University of York, UK. He has worked as a social media manager and consultant for over five years, while giving workshops in several countries. For the past two years, Rob has also been a technology writer, and is MakeUseOf's Social Media…